Low Mortgage Rates Spur Activity

Mortgage applications rose 12.8 percent for the week ending December 2, according to the Mortgage Bankers Association, as U.S. homeowners try to lock in lower rates.

The increase came from the Refinancing Index, which rose 15.3 percent. And, while the Purchase Index increased only 8.3 percent, it hit its highest level since August 5.

“Coming out of the Thanksgiving holiday, applications increased significantly as mortgage rates dropped to their lowest levels in about two months,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “In particular, refinance applications increased sharply, with some lenders seeing refinance volume double.”

And, hopefully that will continue. For the week ending December 8, Freddie Mac reports that the popular fixed-rate mortgages dropped again.

*30-year fixed-rate mortgage (FRM): Averaged 3.99 percent, down from last week when it averaged 4.00 percent. Last year at this time, the 30-year FRM averaged 4.61 percent.

*15-year FRM: Averaged 3.27 percent, down from last week’s average of 3.30 percent. A year ago at this time, the 15-year FRM averaged 3.96 percent.

*5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM): Averaged 2.93 percent this week, up from last week when it averaged 2.90 percent. A year ago, the 5-year ARM averaged 3.60 percent.

*1-year Treasury-indexed ARM: Averaged 2.80 percent this week, up from last week when it averaged 2.78 percent. At this time last year, the 1-year ARM averaged 3.27 percent.

Frank Nothaft, vice president and chief economist for Freddie Mac, said 30-year fixed-rate loans have declined 0.62 percentage points from a year ago, while median sales prices on existing homes are off 4.7 percent, making now the time to buy.

“These low rates and home prices have pushed housing affordability to record highs this year,” he said. “For instance, the National Housing Affordability Index, which dates back to 1971, reached another all-time record high in October for the sixth time in 2011, according to the National Association of Realtors®. Monthly principal and mortgage interest payments accounted for a mere 12.6 percent of median family incomes that month.

“This level of affordability likely contributed to the rise in conventional mortgage applications for home purchases over the week of December 2nd to the most in nearly a year.”